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Can These Stocks Bounce Higher?

Are these stocks ready to take on the market in a rubber match?

However hard the market slams a stock, there's always the chance it'll come bouncing right back. We'll consult our Motley Fool CAPS community to find shares on the rebound, examining one specific sector of the economy in search of companies with rising CAPS ratings.

There are 103 stocks listed under "media" in the CAPS' screener, and more than a handful of them carry well-respected four- and five-star ratings. Those accolades signal our 170,000 CAPS members' confidence that these stocks will beat the market in the months ahead. Let's see what members say about the ones below:

Company

CAPS Rating Today

Recent Price

52-Wk Price Change

Est.

5-Yr. Growth Rate

Disney(NYSE: DIS)

****

$39.23

15%

15%

Madison Square Garden(NYSE: MSG)

****

$25.86

26%

20%

ReachLocal(Nasdaq: RLOC)

*****

$17.03

31%

20%

Source: Motley Fool CAPS; Yahoo! Finance. NA = not available.

The markets have been on a roller-coaster ride lately, but with the S&P 500 up 20% over last year, it might be surprising to learn the CAPS media stocks have risen only 10% in that same time span. Let's take a closer look at why investors think some of these other companies won't be jumping from the frying pan into the fire, now that the markets are roiled again.

Some spring in its stepAs DVD sales succumb to an increasing onslaught from on-demand and alternative digital viewing mediums, entertainment giant Disney is being forced to change the way it does business. It is letting go more than 200 employees from studio entertainment segment, or about 5% of the people associated with Walt Disney and Touchstone Pictures. In turn, it will be counting more on films from Marvel, which it purchased back in 2010.

The latest iteration of Disney's Pirates of the Caribbean franchise has been a big commercial success (though maybe not critically), already pulling in more than $800 million worldwide since its release on May 20, according to movie site Box Office Mojo. But the studio segment saw revenue drop 13% last quarter, and operating profits plunged 65% from the year-ago period. To shore up any fears of a lagging future, Disney previously repurchased from Viacom(NYSE: VIA) the distribution rights to Iron Man 3 and The Avengers, two Marvel movies likely to succeed.

Leaning more on Marvel could also benefit other industry players such as Hasbro(NYSE: HAS), which renegotiated a long-term contract with Marvel right before Disney bought the comic book company, and which has often been tagged the next Marvel. With Disney prominently pushing Marvel's portfolio of characters, Hasbro might just come along for the ride.

But CAPS member youngblood58 sees a number of headwinds facing Disney, particularly if the threatened NFL lockout arrives:

Not surprised that Disney's earnings hit a wall. Their studio is not going to put out many hits this year -- compared to last year -- so I predict the stock will continue to take a hit.

I also don't like the fact that the NFL season might not happen. If that's the case, ESPN will lose a LOT of revenue this fall.

Draw your own opinion on the Disney CAPS page, and add the entertainment leader to your watchlist to see whether the House of Mouse can find its golden age again.

No foundation underfootWhile a busted football season would likely siphon revenues and profits from ESPN, a potential NBA lockout would be worse for Madison Square Garden, if for no other reason than the greater number of basketball games played in a season.

Having spun off from Cablevision(Nasdaq: CMCSA) last year, MSG is in the middle of a big, expensive renovation of its iconic sports and exhibition center. It was hiking ticket prices for Knicks and Rangers games by 49% to pay for the fixes -- a risky move by itself in an economy sporting unemployment rates north of 9% -- but if there's no basketball season at all, the entertainment company would surely face financial trouble.

An investment in MSG will require a willing suspension of disbelief that owners and players will amicably set aside their greed. Nonetheless, CAPS member bball2693 is bullish on MSG's growth because of the importance of a couple of key basketball players:

After a decade of poor management and below average teams, the Knicks acquired superstars Carmelo Anthony and Amare Stoudamire over the past year. Every home game is a near lock to sell-out for years to come, and additional revenue will come from playoff tickets and increased tv viewership, conditions that haven't been in place for this team in years.

While The Motley Fool owns shares of MSG, I'm not certain the near term thesis for the stock is such a slam-dunk. A lot also depends on the performance of the sports teams themselves. Let us know your opinion in the comments section below or on the Madison Square Garden CAPS page if this stock is nothing but net.

A steaming cup of growthLocal search and advertising is hot. While Groupon enjoys substantial buzz, smaller names like Local.com(Nasdaq: LOCM) and ReachLocal offer plum opportunities to grab some of the market. But with the space as crowded as it is, the Fool's Tim Beyers doesn't think ReachLocal has the mechanics right just yet. Its returns on capital are negative and getting worse.

For CAPS member jmbring, ReachLocal's recent results are simply its working out the kinks in preparation for long-haul outperformance. With 96% of the CAPS members backing this investor, it appears that our community's none too concerned about the company's ability to find what it's looking for. Keep an eye on the developments in your neighborhood by adding ReachLocal to the Fool's free portfolio tracker.

The ball's in your courtMany factors go into whether a stock is a buy or sell, so it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made all from a stock's CAPS page. Head over to CAPS today and share your thoughts with other investor analysts on whether you think these stocks are ready to bound higher.

Author

Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.

Having made the streets safe for Truth, Justice and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio. So follow me on Facebook and Twitter for the most important industry news in retail and consumer products and other great stories.